HomeTrust is now flush with cash. Tangible common equity stands at $371 million, or 23% of tangible assets.

The bank's shares have risen 28% since July, to close Friday at $12.81. They still trade at a 27% discount to tangible book value of $17.55, well below the valuations of similarly overcapitalized peers. In the coming year, as the bank deploys its capital, the discount probably will narrow. The shares could rise 25% or more.

Chartered in 1926, HomeTrust is the largest thrift in North Carolina. The bank operates in nine counties in the western part of the state. Asheville, its headquarters, is located in the Blue Ridge Mountains, and is a popular tourist and second- home destination. HomeTrust operates under its own name, in addition to those of five local mutual banks it has partnered with over the years.

The bank's decision to demutualize might have been driven in part by receiving an Individual Minimum Capital Requirement from its regulator earlier this year, due to its elevated credit costs. On Aug. 15, after the conversion, the requirement was lifted.

In fiscal 2012, which ended in June, HomeTrust earned $4.5 million on revenue of $67.4 million. Brady Gailey, of Keefe, Bruyette & Woods, is the only sell-side analyst who covers the shares now. He thinks the bank could earn $9.2 million, or 51 cents a share, in the current fiscal year, on revenue of $65 million.

HomeTrust managed to steer clear of credit difficulties through the recession, as the quality of its mortgage loans stayed strong. But in 2010, credit costs began to creep up, due to the prolonged effects of the slowdown.

In the September quarter, credit costs remained high. Nonperforming assets were 5.22% of total assets, up from 4.59% a year ago. Nonperforming loans, meanwhile, were 5.78% of total loans, up from 4.9% a year ago.

The company has had some success at resolving the loans individually. During the period, charge-offs were just 0.23% of average loans. Management plans to continue to work through the problem loans on a one-by-one basis. Over time, credit costs are likely to improve, which could boost profitability.

MUCH LIKE THE REST of the industry, HomeTrust has had a difficult time adding loans. In the latest quarter, loans fell 2.2% from the prior period, as new originations couldn't offset loan repayments. While a pickup in the North Carolina economy would lead to an increase in activity, that may not happen right away.

Despite the challenges, management is likely to be patient in deploying its capital. "We feel very fortunate that we have so much capital, and we're going to be very strategic about how we deploy it. We are in no big rush," said Chief Financial Officer Tony VunCannon.

In a report, Gailey notes that the bank is mainly interested in acquiring healthy banks, "a hefty order to fill, particularly given the competitive nature of the Carolina marketplace and the health of the local economies." A deal, he writes, "could take years, in our view."

A more immediate way to deploy capital advantageously would be to buy back bank stock. The bank will be free to do that in July, one year from the conversion date, when the restriction on buybacks expires.

Gailey expects HomeTrust to buy back 2.5% of its shares in 2013, and 5% in 2014. Given that the shares trade well below tangible book value, any buybacks could boost the stock price significantly. In a year, he thinks, the shares could be worth $17.50.